How rich do you need to be to buy a second home?
I'm a real estate agent: If I had $1 million, I'd retire here.
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This can be a daunting question. For some, even building your first home may seem like a pipe dream. But more people than you think are buying second homes in surprising numbers and locations. According to the National Association of Home Builders, “The total number of second homes in 2020 was 7.15 million units, accounting for 5.11% of the total housing stock.”
Income is a major factor in whether an individual can purchase a second home. This decision must be made purposefully and thoughtfully. Is buying a second home right for you? And how do we go about it?
Who buys a second home?
According to a recent study by the National Association of Realtors, “median household income for homebuyers has jumped to $107,000 from $88,000 last year.” $107,000 is a significant increase from $88,000 and is the highest average income required to buy a home in the U.S. housing market ever.
A six-figure income is almost a must for anyone looking to buy a second home, and in today's market, a six-figure income is basically required. beginning House.
The average age of first-time home buyers is 35 years old, and the average age of second-time home buyers is 58 years old, so you need to save for at least 20 years before you feel you have enough to buy a second home. It is no exaggeration to say that it must be done. The 58-year-old is nearing retirement age and is likely looking for a vacation home or her second investment property.
Where are the people buying second homes?
According to the National Association of Home Builders, at least 20% of the housing units in 11.2% of all U.S. counties were second homes. Traditionally, seaside properties have been popular as second homes, but in 2023, lakefront properties topped the list.
Savannah, Georgia and New York's Hudson Valley are two of the most popular locations for lakefront second homes in 2023, according to Pacaso, a website that specializes in helping people buy second homes.
In addition to lakeside or beach properties, it is common to own vacation homes in the suburbs. These secondary homes can be used as a means of escaping city life or easily rented out to visitors who want to experience the city without staying in the centre. In fact, second homes are highly desired in cities known for their tourism industries that can easily attract travelers.
When buying a second home, ask yourself – why am I buying this?
“Buying a second home can be a riskier investment and requires more effort than most people realize,” writes Ramsey Solutions, a blog run by Dave Ramsey and his team. Says. “As long as it's the right decision for you, we're not going to stop you from doing it.”
There are many reasons why individuals purchase second places. Some people want to be closer to their families. Some people are looking for properties to flip and resell. Some people want to use their vacation home only for vacation purposes. These are all good reasons for wanting to buy a home. However, keep in mind that buying a second home is a big investment. For example, someone looking for a vacation home may find it easier to pay for a rental property each year rather than worry about the maintenance and upkeep costs of a vacation home.
If you're not sure if a second home is right for you, consult a qualified real estate professional to help you make the right decision.
don't pay with loan
If you decide to buy a second home, there are some important do's and don'ts.
“The price of the home and all associated costs (such as closing costs) must be paid in cash. You should not take out a loan for a second property., Even if it's an investment. ” Ramsey Solutions said. “Loans always involve risk. Taking out a mortgage adds an element of uncertainty to your future.”
According to Ramsey Solutions, only buy a second property if you are prepared to pay the full amount in cash. This includes budgeting and saving so you can buy a home without a loan that could be a liability for years. The key is to avoid adding more mortgages that could keep homeowners in further debt.
Purchasing a second home takes time and effort, and you need to carefully weigh the pros and cons. An individual should check her household income and only consider purchasing her second property if the income is consistently well above her six figures.
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This type of purchase is not suitable for everyone. To determine whether purchasing a second home is best for you, you should consult a real estate agent. But if it's within your means, a second property can be a very valuable purchase that benefits friends, family, and the homeowner himself.
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This article originally appeared on GOBankingRates.com: How wealthy do you need to be to buy a second home?
